Full Judgment Text
$~8
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision: 11.03.2026
+ ARB.P. 2096/2024
ST JOANS EDUCATIONAL SOCIETY .....Petitioner
Through: Mr. Rohan Sharma and Ms.
Ruchika Sharma, Advocates.
versus
MAHANAGAR TELEPHONE NIGAM LIMITED (MTNL)
.....Respondent
Through: Mr. Prashant Sharma and Mr.
Bhavya Belwal, Advocates.
CORAM:
HON'BLE MR. JUSTICE HARISH VAIDYANATHAN
SHANKAR
% JUDGEMENT (ORAL)
HARISH VAIDYANATHAN SHANKAR, J.
1. The present Petition has been filed under Section 11(5) of the
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Arbitration and Conciliation Act, 1996 , seeking the appointment of
a Sole Arbitrator to adjudicate the disputes inter se the parties arising
2
out of the Lease Deed Agreement dated 11.05.2017 .
2. The material on record indicates that the arbitration clause is
envisaged in the Agreement, being Clause 11, which reads as under:-
“11.0 ARBITRATION
11.1 In the event of any question, dispute or differences arising
under this agreement or in connection therewith (except as to
matters the decision of which is specifically provided under this
agreement), the same shall be referred to the sole arbitration by the
1
Act
2
Agreement
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ED, MTNL Delhi Unit (hereinafter referred to as the said officer)
or any person nominated by him.
…..”
3. The material on record further indicates that the Section 21
Notice is dated 18.01.2024.
4. Learned counsel appearing on behalf of the Respondent raises
an objection that the Section 21 Notice ought to have been addressed
3
to the Executive Director and could not have been addressed in a
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generic manner to Mahanagar Telephone Nigam Limited . In
support of the said submission, reliance is placed upon the Order dated
24.01.2014 passed in the ARB. P. 31/2014 filed before this Court.
5. This Court notes that the said Order is prior to the judgment of
the Hon’ble Supreme Court in Perkins Eastman Architects DPC v.
5
HSCC (India) Ltd. by virtue of which it has been held that unilateral
appointment of an Arbitrator is against the law.
6. A perusal of the aforesaid Clause reveals that the said
arbitration Clause would only operate in the event that the ED himself
was to act as the Arbitrator; therefore, the said Clause cannot be
interpreted to mean that only the ED is empowered to nominate an
Arbitrator. Therefore, the objection raised by the learned counsel for
the Respondent is rejected.
7. At this juncture, it is apposite to note that the legal position
governing the scope and standard of judicial scrutiny under Section
11(6) of the Act is no longer res integra . A three-Judge Bench of the
Hon’ble Supreme Court in SBI General Insurance Co. Ltd. v. Krish
3
ED
4
MTNL
5
(2020) 20 SCC 760
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6
Spinning , after taking into consideration the authoritative
pronouncement of the seven-Judge Bench in Interplay Between
Arbitration Agreements under Arbitration Act, 1996 & Stamp
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Act, 1899, In re , comprehensively delineated the contours of judicial
intervention at the stage of Section 11of the Act. The excerpt of Krish
Spg ( supra ) reads as under:-
“ (c) Judicial interference under the 1996 Act
110 . The parties have been conferred with the power to decide and
agree on the procedure to be adopted for appointing arbitrators. In
cases where the agreed upon procedure fails, the courts have been
vested with the power to appoint arbitrators upon the request of a
party, to resolve the deadlock between the parties in appointing the
arbitrators.
111 . Section 11 of the 1996 Act is provided to give effect to the
mutual intention of the parties to settle their disputes by arbitration
in situations where the parties fail to appoint an arbitrator(s). The
parameters of judicial review laid down for Section 8 differ from
those prescribed for Section 11. The view taken in SBP &
Co. v. Patel Engg. Ltd., (2005) 8 SCC 618 and affirmed in Vidya
Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 that Sections 8
and 11, respectively, of the 1996 Act are complementary in nature
was legislatively overruled by the introduction of Section 11(6-A)
in 2015. Thus, although both these provisions intend to compel
parties to abide by their mutual intention to arbitrate, yet the scope
of powers conferred upon the courts under both the sections are
different.
112 . The difference between Sections 8 and 11, respectively, of the
1996 Act is also evident from the scope of these provisions. Some
of these differences are:
112.1 . While Section 8 empowers any “judicial authority” to refer
the parties to arbitration, under Section 11, the power to refer has
been exclusively conferred upon the High Court and the Supreme
Court.
112.2 . Under Section 37, an appeal lies against the refusal of the
judicial authority to refer the parties to arbitration, whereas no such
provision for appeal exists for a refusal under Section 11.
112.3 . The standard of scrutiny provided under Section 8 is that of
prima facie examination of the validity and existence of an
arbitration agreement. Whereas, the standard of scrutiny under
6
(2024) 12 SCC 1
7
(2024) 6 SCC 1
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Section 11 is confined to the examination of the existence of the
arbitration agreement.
112.4 . During the pendency of an application under Section 8,
arbitration may commence or continue and an award can be passed.
On the other hand, under Section 11, once there is failure on the
part of the parties in appointing the arbitrator as per the agreed
procedure and an application is preferred, no arbitration
proceedings can commence or continue.
113 . The scope of examination under Section 11(6-A) is confined
to the existence of an arbitration agreement on the basis of Section
7. The examination of validity of the arbitration agreement is also
limited to the requirement of formal validity such as the
requirement that the agreement should be in writing.
114 . The use of the term “examination” under Section 11(6-A) as
distinguished from the use of the term “rule” under Section 16
implies that the scope of enquiry under Section 11(6-A) is limited
to a prima facie scrutiny of the existence of the arbitration
agreement, and does not include a contested or laborious enquiry,
which is left for the Arbitral Tribunal to “rule” under Section 16.
The prima facie view on existence of the arbitration agreement
taken by the Referral Court does not bind either the Arbitral
Tribunal or the Court enforcing the arbitral award.
115 . The aforesaid approach serves a twofold purpose — firstly, it
allows the Referral Court to weed out non-existent arbitration
agreements, and secondly, it protects the jurisdictional competence
of the Arbitral Tribunal to rule on the issue of existence of the
arbitration agreement in depth.
117 . In view of the observations made by this Court in Interplay
Between Arbitration Agreements under the Arbitration Act, 1996
& the Stamp Act, 1899, In re, (2024) 6 SCC 1 , it is clear that the
scope of enquiry at the stage of appointment of arbitrator is limited
to the scrutiny of prima facie existence of the arbitration
agreement, and nothing else. For this reason, we find it difficult to
hold that the observations made in Vidya Drolia v. Durga Trading
Corpn., (2021) 2 SCC 1 and adopted in NTPC Ltd. v. SPML Infra
Ltd. , (2023) 9 SCC 385 that the jurisdiction of the Referral Court
when dealing with the issue of “accord and satisfaction” under
Section 11 extends to weeding out ex facie non-arbitrable and
frivolous disputes would continue to apply despite the subsequent
decision in Interplay Between Arbitration Agreements under the
Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC
1.
119 . The question of “accord and satisfaction”, being a mixed
question of law and fact, comes within the exclusive jurisdiction of
the Arbitral Tribunal, if not otherwise agreed upon between the
parties. Thus, the negative effect of competence-competence would
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require that the matter falling within the exclusive domain of the
Arbitral Tribunal, should not be looked into by the Referral Court,
even for a prima facie determination, before the Arbitral Tribunal
first has had the opportunity of looking into it.
120 . By referring disputes to arbitration and appointing an
arbitrator by exercise of the powers under Section 11, the Referral
Court upholds and gives effect to the original understanding of the
contracting parties that the specified disputes shall be resolved by
arbitration. Mere appointment of the Arbitral Tribunal does not in
any way mean that the Referral Court is diluting the sanctity of
“accord and satisfaction” or is allowing the claimant to walk back
on its contractual undertaking. On the contrary, it ensures that the
principle of arbitral autonomy is upheld and the legislative intent of
minimum judicial interference in arbitral proceedings is given full
effect. Once the Arbitral Tribunal is constituted, it is always open
for the defendant to raise the issue of “accord and satisfaction”
before it, and only after such an objection is rejected by the
Arbitral Tribunal, that the claims raised by the claimant can be
adjudicated.
121 . Tests like the “eye of the needle” and “ex facie meritless”,
although try to minimise the extent of judicial interference, yet they
require the Referral Court to examine contested facts and
appreciate prima facie evidence (however limited the scope of
enquiry may be) and thus are not in conformity with the
principles of modern arbitration which place arbitral autonomy and
judicial non-interference on the highest pedestal.
122 . Appointment of an Arbitral Tribunal at the stage of Section 11
petition also does not mean that the Referral Courts forego any
scope of judicial review of the adjudication done by the Arbitral
Tribunal. The 1996 Act clearly vests the national courts with the
power of subsequent review by which the award passed by an
arbitrator may be subjected to challenge by any of the parties to the
arbitration.
*
126 . The power available to the Referral Courts has to be construed
in the light of the fact that no right to appeal is available against
any order passed by the Referral Court under Section 11 for either
appointing or refusing to appoint an arbitrator. Thus, by delving
into the domain of the Arbitral Tribunal at the nascent stage of
Section 11, the Referral Courts also run the risk of leaving the
claimant in a situation wherein it does not have any forum to
approach for the adjudication of its claims, if its Section 11
application is rejected.
127 . Section 11 also envisages a time-bound and expeditious
disposal of the application for appointment of arbitrator. One of the
reasons for this is also the fact that unlike Section 8, once an
application under Section 11 is filed, arbitration cannot commence
until the Arbitral Tribunal is constituted by the Referral Court. This
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Court, on various occasions, has given directions to the High
Courts for expeditious disposal of pending Section 11 applications.
It has also directed the litigating parties to refrain from filing bulky
pleadings in matters pertaining to Section 11. Seen thus, if the
Referral Courts go into the details of issues pertaining to “accord
and satisfaction” and the like, then it would become rather difficult
to achieve the objective of expediency and simplification of
pleadings.
128 . We are also of the view that ex facie frivolity and dishonesty
in litigation is an aspect which the Arbitral Tribunal is equally, if
not more, capable to decide upon the appreciation of the evidence
adduced by the parties. We say so because the Arbitral Tribunal
has the benefit of going through all the relevant evidence and
pleadings in much more detail than the Referral Court. If the
Referral Court is able to see the frivolity in the litigation on the
basis of bare minimum pleadings, then it would be incorrect to
doubt that the Arbitral Tribunal would not be able to arrive at the
same inference, most likely in the first few hearings itself, with the
benefit of extensive pleadings and evidentiary material.”
(emphasis supplied)
8. The decision in Krish Spinning (supra) thus unequivocally
reiterates that the Referral Court, while exercising jurisdiction under
Section 11of the Act, is required to confine itself to a prima facie
examination of the existence of an arbitration agreement and nothing
beyond. The Court’s role is facilitative and procedural, namely , to give
effect to the parties’ agreed mechanism of dispute resolution when it
has failed, without embarking upon an adjudication of contentious
factual or legal issues, which are reserved for the Arbitral Tribunal.
9. In view thereof, this Court is of the view that the prayers as
sought are to be allowed.
10. At this stage, learned counsel for the parties are ad idem that the
arbitration would take place under the aegis of the Delhi
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International Arbitration Centre and would abide by its rules and
regulations.
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DIAC
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11. Material on record indicates that the valuation of the present
dispute is stated to be approximately Rs. 8 Lakhs.
12. Accordingly, Mr. Joby Varghese, Advocate (Mobile No:
9899855689) is appointed as the Arbitrator to adjudicate the disputes
inter se the parties. The learned Arbitrator shall be entitled to fees as
per the Schedule of Fees maintained by the DIAC.
13. The learned Arbitrator may proceed with the arbitration
proceedings, subject to furnishing to the parties the requisite
disclosures as required under Section 12(2) of the Act.
14. The parties shall share the learned Arbitrator's fee and arbitral
costs equally.
15. All rights and contentions of the parties in relation to the
claims/counterclaims are kept open, to be decided by the learned
Arbitrator on their merits, in accordance with law.
16. Needless to state, nothing in this order shall be construed as an
expression of opinion of this Court on the merits of the controversy.
All rights and contentions of the parties in this regard are reserved.
17. Let the copy of the said order be sent to the learned Arbitrator
through the electronic mode as well.
18. Accordingly, the present Petition, along with pending
application(s), if any, stands disposed of in the above-stated terms.
HARISH VAIDYANATHAN SHANKAR, J.
MARCH 11, 2026/nd/va/jk
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